Market Insights

Monthly Market Insights: August 2026

US and Canadian markets

Stocks were mixed in July as investors navigated a cross-current of news on the outlook for AI spending and Q2 corporate reports. The Dow Jones Industrial Average led, adding 0.32 percent. The Standard & Poor’s 500 Index edged down 0.13 percent, while the Nasdaq Composite lost 3.20 percent. The S&P/TSX gained 1.06 percent.

Inflation power

The early part of the month was light on key economic reports, so investors cheered mid-month news that consumer inflation came in lower than expected. Wholesale inflation also came in below expectations, which helped the “improving inflation” narrative.

Q2 market volatility

Stocks rallied early in May, notching multiple intraday and closing records, even though volatility remained high. Wall Street cheered falling oil prices and an upbeat jobs report, but was a bit unsettled by a hot April inflation report.

Kevin Warsh was sworn in as the new Fed chair late in the month, which appeared to bolster investor confidence, with all three major averages hitting multiple record closes.

Mixed Q2 earnings

Mixed Q2 corporate reports from four influential tech companies pushed and pulled stock prices. But chip stocks led an enthusiastic rally over the last two days of the month, which was enough to push the Dow into the green and pare losses for the S&P and Nasdaq.

AI in the news

Middle East diplomatic news affected trading all month, as did concerns about how much money companies would need to spend on AI.

US sectors

Energy (+12.1%) was the leading sector, benefiting from rising oil prices over the month. Financials (+6.2%), Health Care (+2.5%), Consumer Staples (+2.4%), Real Estate (+2.4%), and Communication Services (+1.0%) all posted solid gains.

The remaining five sectors underperformed. Materials (-0.8%) and Consumer Discretionary (-1.0%) posted modest losses. Utilities (-2.2%) and Industrials (-2.9%) declined more.

Information Technology (-8.0%) was under pressure all month, which put the spotlight on other sectors that were in favor.

Canada recap

The S&P/TSX Composite Index rose in July as energy and materials drove the bulk of returns, while a late-month rally in tech and financials added to gains. A stronger-than-expected employment report helped sentiment, including news that the unemployment rate nudged down 0.1% to 6.5%.

Investors seemed to rotate in and out of financial and tech shares from week to week, with AI disruption a major theme for the month. The TSX hit an all-time record high of 35,749.70 on July 28 before trending lower due to fluctuating commodity prices, which put pressure on energy and mining names.

Market/Index	July 2026 change	YTD change
S&P 500	-0.13%	9.41%
NASDAQ	-3.20%	9.17%
Russell 2000	-3.08%	18.11%
S&P/TSX Composite	1.06%	11.08%
10-Year Treasury Notes	4.75	0.58
Fed Funds Rate	3.50-3.75	3.50-3.75

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance doesn't guarantee future results. US Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

World markets

The MSCI EAFE Index rose 1.91% in July behind a solid performance from European markets.

The United Kingdom (+3.53%) led, with Germany (+2.53%), Italy (+0.95%), Spain (+1.60%), and France (+1.26%) also posting solid gains.

Several markets outside of Europe also had good months. Brazil (+3.47%) and Egypt (+5.85%) were the most impressive. Elsewhere, Mexico (-0.04%) edged lower, and India (+2.11%) headed higher.

On the Pacific Rim, China's Hang Seng Index rose a strong 13.13%. But Korea’s KOSPI was again the story of the month, falling 22.19%. The KOSPI is up more than 56% through July 31, but the month-after-month volatility is causing concern among Korean officials and other market watchers.

World market recap

Emerging Markets	July 2026 change	YTD change
Hang Seng (China)	13.13%	0.99%
KOSPI (Korea)	-22.19%	56.51%
Nikkei (Japan)	-8.14%	27.70%
Sensex (India)	2.11%	-8.36%
EGX 30 (Egypt)	5.85%	27.76%
Bovespa (Brazil)	3.47%	10.47%
IPC All-Share (Mexico)	-0.04%	4.09%
ASX 200 (Australia)	2.26%	3.01%
DAX (Germany)	2.53%	4.65%
CAC 40 (France)	1.26%	4.42%
IBEX 35 (Spain)	1.60%	14.30%
FTSE 100 (United Kingdom)	3.53%	9.43%
IT40 (Italy)	0.95%	16.08%

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance doesn't guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

• Gross Domestic Product (GDP). The economy grew 1.5% year-over-year in the second quarter, slower than Q1’s 2.1% annualized growth and falling short of the 1.8% growth economists expected. An increase in AI-related imports (e.g., semiconductor chips for data-center builders) and lower overall government spending both detracted from GDP growth. On the upside, overall computer spending (including AI and adjacent industries) drove about half of GDP growth, while consumer spending was also a major contributor.

• Employment. Employers added 57,000 jobs in June, missing expectations for 115,000 jobs and slowing from the 129,000 jobs (revised down from 172,000) added in May. The unemployment rate declined to 4.2% in June after three consecutive months holding steady. Year-over-year wage growth rose 3.5%, as expected, a slightly faster pace than May’s 3.4% wage gain.

• Retail sales. Consumer spending rose 0.2% in June over the prior month, in line with expectations but slower than May’s 1.0%. Year-over-year retail sales increased 6.7% in June, easing from May’s 7.3-percent increase.

• Industrial production. Industrial output edged higher by 0.1% in June over the prior month, matching May’s production rate but just shy of the 0.2% increase expected. Year over year, industrial production rose 1.1%, a slowdown from a 1.7% annualized gain in May and a 1.4% gain in April.
• Housing. Housing starts rose 19.0% in June over the prior month, following May’s 15.2% decline. A 76.3% increase in multifamily starts drove most of the increase, while single-family starts slipped 0.2%. Regionally, the Northeast (+10.3%), the South (+15.2%), the West (+22.1%), and the Midwest (+33.3%) all participated. Year over year, starts rose 3.5%.

Sales of existing homes fell 2.4% in June over the prior month to 4.09 million units, missing expectations of 4.2 million units sold. Regionally, sales rose in the Northeast but declined in the Midwest, West, and South. The median existing home sales price was $440,600, 1.8% higher than in June 2025. The supply of unsold homes in June was 1.56 million units, down 0.6% month over month but up 1.3% year over year, and equal to 4.6 months of supply at the current sales rate.

Sales of newly constructed, single-family homes rose to 628,000 in June from an upwardly revised 618,000 in May, beating expectations for 606,000 new home sales. The median new home price was $398,300 in June, down 3.3% from May. Inventory in June ticked down 0.2% from May to 485,000 unsold new homes, equal to 9.3 months of supply at the latest sales pace.

• Consumer Price Index (CPI). Inflation fell 0.4% in June over the prior month, more than expected. Falling gas prices and a 5.7% month-over-month drop in the CPI’s energy index drove the bulk of the decline. Core CPI (excluding energy and food) was flat in June over the prior month, cooler than the 0.2% increase economists expected and slower than May’s 0.2% rise.

• Durable goods orders. Orders of manufactured goods designed to last three years or longer edged up 0.3% in June. The increase fell short of the 2.1% increase economists expected, but it was better than May’s upwardly revised 4% drop.

The Federal Reserve

As expected, the Federal Open Market Committee (FOMC) held rates steady at its July meeting.

The FOMC voted 9-3 to hold rates steady. Fed Chair Kevin Warsh noted the Committee’s broad agreement on the price stability mandate and the 2% inflation target, and that disagreement centered more around the tactics to achieve the price stability goal.

Though not an official FOMC meeting, the Fed will host its annual conference in Jackson Hole, Wyoming, at the end of August. This year’s conference theme is “Financial Innovation: Implications for Payments and Policy.” The next official FOMC meeting is September 15-16.

By the numbers: summer spending